Financial Crime World

Financial Crimes and Terrorism Financing Threat in Sri Lanka: An In-depth Analysis

The Growing Concerns and Challenges in Preventing Illicit Activities

Sri Lanka, an island nation in the Indian Ocean, has become increasingly attractive to international attention due to the nexus between financial crimes and terrorism financing. In this article, we provide an in-depth analysis of the financial crimes and terrorism financing landscape in Sri Lanka, highlighting the growing concerns and challenges in preventing illicit activities.

Context

  • Sri Lanka is a strategic location for financial crimes and terrorism financing, due to its weak regulatory framework and porous financial system.
  • Country’s economic growth and attractiveness to multinational corporations have made it an attractive destination for money laundering and terrorism financing activities.

Financial Crimes in Sri Lanka

Money Laundering

  • Estimated total assets involved in money laundering activities between 2011 and 2019 were around USD 5.6 billion.
  • Common money laundering methods in Sri Lanka include trade-based money laundering, real estate transactions, and complex layering methods.

Securities Fraud

  • Prevalent in the Colombo Stock Exchange where insider trading, pump and dump schemes, and other forms of market manipulation are common.

Corruption

  • Deeply rooted in Sri Lanka’s political and economic systems, with the country ranking 106 out of 180 in Transparency International’s Corruption Perceptions Index 2020.

Terrorism Financing in Sri Lanka

  • A major concern, with Sri Lanka identified as a major source and transit point for funding terrorism activities.
  • Primary sources of terrorism financing include drug trafficking, smuggling, and extortion.

Drug Trafficking

  • Proceeds from drug trafficking are often used to fund terrorism activities.
  • Sri Lanka’s strategic location and porous borders make it an ideal spot for international drug smuggling networks to operate.

Smuggling

  • Proceeds from smuggling are also used to fund terrorism activities.
  • Complex maritime border and weak regulatory framework make Sri Lanka an attractive destination for smugglers and pirates.

Extortion

  • Increasingly common method of terrorism financing in Sri Lanka.
  • Criminals threaten individuals or businesses with violence or other forms of coercion to extort money.

Challenges and Concerns

  • Weak regulatory framework, with limited resources and expertise at the disposal of the relevant authorities.
  • Insufficient resources make it difficult to effectively monitor and regulate financial transactions.
  • Lack of political will to effectively tackle financial crimes and terrorism financing.

Conclusion

The increasing nexus between financial crimes and terrorism financing in Sri Lanka is a cause for deep concern. To effectively prevent these activities, the Sri Lankan government must take decisive action to:

  • Strengthen its regulatory framework
  • Allocate sufficient resources
  • Demonstrate political will to tackle these issues.

Only then can Sri Lanka hope to effectively prevent financial crimes and terrorism financing and protect its financial system and economy.